Free Spirit’s Closure Signals Weakening of Quilting Cotton Market

Coats and Clark took the quilting community by surprise last week when the company announced they’d be closing Free Spirit Fabrics, their premium quilting cotton brand, effective May 1. “We had been working diligently to grow this division,” said the president of North America Crafts at Coats, Stephanie Leichtweis, in a phone interview. “There was an inherent weakness in the business model that couldn’t be overcome. The fabric business is very crowded. We’re not the only ones in the industry looking at how to get in front of 4,000 independent retailers every day.” Lechtweis was hired for the position in October.

Crafts represent just 16% of Coats’ overall business which is primarily focused on industrial and performance threads. The company has steadily reduced their craft portfolio over the last two years. In the summer of 2016 Coats closed down their UK crafts division when it proved unprofitable. At the same time Westminster Fibers, a Coats subsidiary, ceased distributing specialty hand knitting yarns to independent yarn shops. The shuttering of Free Spirit is yet another step in streamlining this sector of the company.

According to the Coats financial reports the margin on their crafts products is slim, just 3% versus 13.3% margin on their industrial threads for the first half of 2016, for example. The company’s craft sales have been declining for at least two years. In the first half of 2017 their needlecraft sales were down 11%. Without Free Spirit Coats is left with Red Heart yarns and the Coats thread brand, both of which are sold at big box retailers such as Wal-Mart and JoAnn Fabrics.

Free Spirit had 26 booths at Fall Quilt Market in 2017, or 2.6% of the show floor. Image via Free Spirit on Instagram.

The Founding of Free Spirit

Free Spirit was founded in 2000 by Nan Harding, the owner of Fabric Traditions. She hired Donna Wilder, vice president of marketing at Fairfield, to start what she envisioned as premium quilting cotton company with a distinctly modern aesthetic.

“I felt the quilting industry at that point really needed a new vision,” Wilder said in a phone interview last week. She began recruiting modern surface pattern designers from other industries to design fabric, seeking them out at stationary and home shows. Wilder signed Amy Butler, Denyse Schmidt, and Anna Maria Horner, and Free Spirit made a splash in the quilting industry. Over the course of six years, from 2000-2006, with a team of just four employees, Wilder grew Free Spirit into a profitable company that she says was grossing five million dollars when Fabric Traditions sold it to Coats & Clark in January of 2007.

The Free Spirit team at QuiltCon 2017 in Savannah. Some employees will be offered jobs elsewhere within Coats. Image via Free Spirit on Instagram.

Rapid Growth

The quilting industry as a whole experienced a 20-year period of rapid growth around the time that Free Spirit was established. According to the Quilting in America survey, in 1997 the value of the market was $1.21 billion. By 2014 it was worth more than three times that amount at $3.76 billion. Today there are 40-50 companies today manufacturing premium cottons for the quilting market.

Still, the margin on quilting cotton has always been slim. Quilting fabric is printed in factories in Korea and Japan where the minimum run per design is 3,000 yards, 1,000 yards for each colorway. It costs about $2.00 to print a yard of fabric and another .50 to import that yard into the United States where it’s sold to a local shop for around $5.50. The fabric company uses the difference, or margin, to pay all of their expenses, with whatever is left taken as profit. Expenses include employee salaries and health insurance, rent for office space, warehouse costs, insurance on the merchandise, pay for sales reps or distributors, royalty payments for the designers, and marketing costs including Quilt Market. “When it’s all said and done the margin is essentially gone,” explains Gina Pantastico, co-founder and director of operations at Cloud9 Fabrics. “You have to sell a whole lot of fabric to make it work.”

While the quilting industry was booming, fabric manufacturers ramped up the pace of production and were able to make it work financially. “In 2009 I would say we did 35-40 collections a year,” Mickey Krueger, president of Windham Fabrics, said in a 2016 interview on my podcast. “Today, we do 100.” Ted Hoffman, president of Clothworks, said in an interview on Sit & Sew Radio last week, “If you’re the end consumer the quantity of stuff you have coming at you is unparalleled.”

According to the Quilting in America survey, in 2017 the quilting industry’s growth leveled off for the first time in twenty years. When demand slowed the excess supply of fabrics caused the market to soften. At the same time, retail of all kind is going through a transition as consumers increasingly buy online, and quilting supplies are no different. Although 97% of dedicated quilters are purchasing supplies in person, 68% are also buying online. The amount of fabric they’re buying, on average, decreased slightly from 99.9 yards per year in 2014 to 99 in 2017.

Bolts of Free Spirit fabric on display at Missouri Star Quilt Company in Hamilton, Missouri.Image via Free Spirit on Instagram.

Is Ecommerce to Blame?

The shift to ecommerce, combined with the aging population of quilt shop owners, has caused many brick-and-mortar quilt shops to close their doors. Gamache says he’s tracked a 10% shrinkage rate in the number of shops he sells fabric to in the last two years.

Industry observers point to Fabric.com, a large online fabric shop which was bought by Amazon in 2008, as a major culprit in undercutting brick-and-mortar shop prices. Fabric company executives, however, tell a different story.

“It’s true that Fabric.com may sell some fabric for less money and if that’s what they’re doing wrong in anybody’s eyes, I’m not sure that’s entirely valid,” says Krueger of Windham. “They buy a lot of fabric. Anybody that buys a lot of fabric is probably going to be entitled to a discount; it doesn’t matter if you’re Fabric.com or a brick-and-mortar store. Their philosophy is to sell it aggressively and I’m not sure that there’s anything wrong with that. I’m sure there are many brick-and-mortar stores that sell fabric aggressively. We just don’t know about it because they’re not online shouting it out.”

Pantastico of Cloud9 explains that if Fabric.com were really the cause of brick-and-mortar closures she’d see a dramatic uptick in the size of their orders, but that’s not the case. “Is Fabric.com making up for the loss in brick-and-mortar shops? No. If they were, nobody’s sales would be declining. While ecommerce has changed the way people are buying, it hasn’t picked up the slack.”

There’s simply more fabric on the market than there is shops, or end consumers, to buy it. “Shops can’t purchase what’s available,” Kenneth Gamache, president of QT Fabrics, explained on the Sit & Sew Radio podcast last week. “We’re purchasing inventory in the hopes to sell it, but getting over-inventoried can ruin a business, not just on the shop level, but on the supplier level, too.”

Although many in the industry have noted the issue of excess supply, Free Spirit’s closure still came as a surprise. With a roster of all-star designers including Tula Pink, Kaffe Fassett, Heather Bailey, and Tim Holtz among others, it seemed that if any company would survive it would be this one. “The market has gotten very dense and more challenging the last few years for everyone,” Michael Steiner, co-founder and president of Michael Miller Fabrics, stated in an email last week. “I’m not surprised a company has bowed out, but I am surprised that company is Westminster.”

The Influence of Instagram

Popular social media platform, Instagram, launched in 2010, just a year after the Modern Quilt Guild was founded. The highly visual nature of the site made it an easy favorite for quilters to socialize online. Fabric companies took note, offering quilting influencers fabric lines as a way to build marketing partnerships to sell more yardage.

“I felt like people were getting gobbled up,” says Michelle Engel Bencsko, co-founder and creative director at Cloud9. “It was just a matter of time before this personality or that got gobbled up and had a fabric range.” Although exciting for designers and their fans, those partnerships are proving to have limited sales power in a downturn.

Karen Montgomery, owner of The Quilt Company, an independent quilt shop in Allison Park, Pennsylvania explains, “I think the real takeaway from this is that social media followers do not equal retail sales. Consumers may love your blog and hang on your every Instagram post, but that doesn’t mean they will buy what you are selling at regular retail prices.” Instead, the market became flooded with fabric that Engle Bencsko says doesn’t tell a good story. “I see a lot of bad artwork on fabric and I think ‘how are they selling this’?”

For Coats several unprofitable years in a row was enough to prompt an exit from the premium quilting cotton business. “It was time to part ways so that the Coats brand has the ability to succeed with a new strategy,” Leichtweis said. “We love our fabric and our designers and bringing them to market. This decision wasn’t taken lightly. We’re focused on an innovation-led growth strategy, but their designs and creativity won’t end.”

*Feb. 22 @12:41 pm After hearing feedback from independent quilt shop owners as well as more fabric company presidents we adjusted the margin dollar amounts stated in this article for better accuracy.

30 Comments

Gail
on February 22, 2018 at 9:55 am

Thanks for this article!

What I want to know is: did Coats tried to sell Free Spirit before deciding to shut it down? With some tweaks (like focusing on the best-selling designers instead of distracting with all the rest) I’m sure it could have been more profitable…

When I spoke with Stephanie she said that they looked a variety of avenues including selling it. She didn’t provide any further details. I did hear secondhand after the closure announcement was made that a potential buyer came forward, but I wasn’t able to verify that.

What was there to buy? Unprofitable inventory, stacked high? The good designers can now be picked up without having to buy the whole company, and be saddled with the company’s failures, or designers with no market, or production inefficiencies. Existing fabric companies have an art department, a supply channel, contracts for mill production, etc. If the Free Spirit “brand” wasn’t enough to sell the product, then what would be? It is sad to loose a high quality player, but one mustn’t confuse quality with demand. If consumers had been in love, love, love with their every design, it wouldn’t have gone under. It behooves the question, is the core of the industry really that “modern” and Avant garde or is the base of the industry more traditional. Ultimately is the customer, the end consumer, who runs the industry, and not the other way around.

I totally agree. It appears that the big named brands like Tula Pink, Kaffe Fassett and Anna Maria Horner have been dragged down by the comapny’s desire to sign new names. I also think the pressure they put on designers to release two collections each year plays a part. Those of us in countries outside USA barely received the Spring release in our shops before we started seeing the Fall collection online.

Those are big names among the newer quilters, and modern fabric buyers. There are more quilters spending money out there. For instance, sorry but I don’t like many of the designer’s fabrics you mentioned. And I spend money on fabrics. I just don’t remember what fabrics Free spirit even put out, which says more about their choices and marketing. I can tell other manufacturers, Like Moda, Hoffman, and Northcut lines from a distance. I don’t think one manufacturer can spell the demise of an enormous industry

I completely agree. I think they’ve been pushing us quilters too hard into the ultra modern quilt lines when we just do not want to go there. I wouldn’t buy any of their big name designers they mentioned, but I love some others, and I spend a lot of money on fabric.

Donna C
on February 26, 2018 at 8:24 pm

Coats and Clark stated they had a flawed business model so there must be more to the story than just the end consumer in my opinion. Many cogs in the wheel.

What a brilliant article Abby, you are a wonderful writer! Thank you for clearly defining the current state of the fabric and quilting industry. It all makes perfect sense and you didn’t miss any detail. Well done!

I’m still buying just as much fabric as I have in the past if not more based on $, but I’m not eeeeeking over designers like we were at the beginning of the modern fabric movement. There are too many designers and they release collections too often which results in oversaturation. Look at the number of shops that had C+S inventory and had to sell it clearance just to make room for the next wave of collections. This hurts the overall industry.

Shops, small and large, need to make a fair margin in order to stay in business. I know shops where the owners barely make any money (less than minimum wage when you add up their hours worked) because of the low margins. Perhaps fa##ic[dot]com plays a small part at lowering margins, but so are all of the various small mom & pop shops, Etsy sellers, FBA on Amazon, etc. that have no overhead and are happy to make 10% margin. An online store with overhead (rent, insurance, payroll, etc.) can’t stay in business for 10-15% margin, and B&M stores certainly can’t either.

The problem is that the fabric manufacturers are in a race to the bottom. Look at Moda and how easy it is to buy at wholesale rates there with no store, no history, no business name and just a credit card. That’s why some online quilt shops refuse to carry Moda – as soon the store gets the new fabric in stock, it’s already on clearance somewhere else. The fabric manufacturers will sell to just about anyone. If you look at other industries, there are stricter terms in the supplier contracts – minimum order requirements, rules on when you can start selling a new line, etc. that levels the playing field for all stores and preserves margin. Even the premium sewing manufacturers do this. Yet, the fabric manufacturers are afraid to enact any supply chain terms because they are starving for revenue and will sell to just about anyone. That’s not a recipe for industry success. We need a shakeout in the industry: manufacturers, stores, LQS, etc. It’s sad to say, but many an industry have died because the wholesale/retail supply chain health died due to oversupply, easy wholesale access, and margin dilution.

This is an interesting comment, Sarah. About a year ago I did a bunch of research into what it takes to open a wholesale account with a fabric manufacturer. I published the results here: https://whileshenaps.com/2017/02/buy-quilting-fabric-wholesale.html What I found, in summary, is that it takes very little, just as you said. You need to have an EIN number which is available for free online, a URL (which can be an Etsy shop), an address (can be a home address) and about $1,000 (some manufacturers require a bit more for the initial order and some a bit less). So, it doesn’t take much.

Abby, I think a great idea for an upcoming blog post is a “round 2” of that epic post about buying fabric wholesale but you interview store owners (perhaps a survey of sorts with some follow-up emails). If you keep the feedback private and just publish the results and your observations from talking to store owners, I think that’d be a really intriguing piece. I know two store owners and they constantly give their rep, the rep’s regional sales manager, and the fabric manufacturer VP’s feedback – often to no avail other than the usual tut-tut response. Store owners, whether online or B&M, whether large or small, have some unique views on the state of the industry.

Great article, Abby. Thanks for doing the research to explain some reasons for what was (at first) a hard-to-believe closure.

Am I reading your article correctly — the Quilting in America survey finds that quilters buy (on average) about 99 yards of fabric per year? That’s per person who responded to the survey? If that’s true, I’m way behind!

I think that 99 yards of fabric on average is probably pretty accurate. I quilt for fun most days of the year. Even though I have been working on using my stash some, I still buy new fabric every month. I figure I completed approximately 25 (probably more) projects last year. On average it takes 5.25 – 7.5 yards of fabric to back a quilt (twin/full – queen), so I figure in backing alone I 131 – 187 yards of fabric. For those same quilts it can take anywhere from 6 – 14 yard of fabric for the piecing (150 – 350 yards). Now I am not saying I go out and buy 537 yards of fabric every year, but that does mean that I buy quite a bit. I know other quilters (my mom) who only buys for each project, so for her current quilt she bought 2 bolts of fabric about 5 years ago, and hasn’t bought any since. It’s hard to believe the numbers until you add them up.

Similarly I have had many friends ask me how much thread I go through in a year. I had never thought about this, but this year I am keeping the dead spools. Knowing that I will use bits of other spools throughout the year. I already have 2 – 100 m spools that are empty in the first 2 months of the year.

Thank you for keeping us updated on the happenings. I know many of the designers are looking for their new homes (per their social media), and can’t wait to see what they do once they find them and are settled.

This article looks at an issue I see happening in the beauty world. Watching companies pump out new make up collections every month of so and doing collaborations with influencers is making for a VERY cluttered market full of over-prices collections. Some influencers bring a big audience but at some point it gets ridiculous to keep up, to pay for the influencer’s involvement . Brands played games with calling products “Limited-Edition”. One can only scramble for the latest “ limited edition” $50 eye shadow palette so many times a month before one wakes up and itealizes it is a marketing game and the loser is the consumer. Especially when they started doing “restocks” and finally after a year of that would make things “permanent”. Genius market but gross.

I was hooked on makeup for about a year and then I realized the pace of the “next great thing” coming out was faster than I wanted or needed to keep up with and I stopped buying about two years ago. I sat back and watched people try to buy everything new and wonderful-and it is wonderful stuff but how many blue eye shadows or matte foundations does one need? The brands and their influencers want you to believe the answer is “unlimited” or “all of them” social media created a brilliant marketing platform for brands to show you how you need it all. But most of us eventually decide we need only “a few” or “one”

Social media created created an excitement for having it all that wasn’t based on greed but rather having a complete “collection” of makeup. It was about these amazing products that are super pretty But the brands who got greedy. They took advantage of consumers who, through social media, fell in love with the brands themselves and wanted to support them. Instead of putting out great products as they organically developed them, they pumped out shoddy copies of whatever was on trend and created ridiculous trends with unwearable products-rainbow highlighters are only good for festivals and LGBTQ events. They collaborated with big name influencers and then had those products produced in China. While those products cost more to purchase they are often inferior.
Last year I started noticing that people were fatigued with it all. I started seeing “No buys” or “ Low buys” as people started realizing their collections were becoming unmanageable.

I have no doubt the makeup industry will have a difficult year in 2018 as they are still ramping up the releases and collaborations and consumers are no longer buying everything that comes out, instead judiciously waiting for those things they need or feel especially completlled to add to their collection.

According to this blog, for abric companies are using social media influencers to put out collections and are over producing for the market, making the same mistakes the makeup world is. Social media can be a powerful marketing tool but like everything else it must be used judiciously and with good business sense.

Thanks Abby – I knew I could count on you to keep us informed. I too was struck by ‘99 yards per year’ – mind blowing. I have unfollowed many fabric companies on IG because I was overwhelmed by so many fabric releases. It felt like I was de-stashing my feed! Sometimes it’s all just too much to take in, which is why I like my small lqs. Still, those Free Spirit designers are extraordinary (Kaffe Fassett and Denise Schmidt are my favs) and I was baffled by their release. I look forward to seeing how this plays out.

Thanks for the very interesting article. As the owner of a small shop I find it totally overwhelming the amount of ranges fabric manufacturers produce – both in terms of size of range, and the frequency of new ranges. As others have said, it is almost out of date the moment it hits the shelves. I’ve become very selective in what I buy and I try to avoid trends – I leave that to the big stores!

I’m also a dressmaker and I think there is a similar movement in Indie pattern designers. Now-a-days any blogger can start a pattern line and there is such an influx of new patterns on a weekly basis, many of which offer nothing unique. Before you’ve even had time to sew up a new pattern, Instagram has moved onto something new. I read a really interesting blog post this week on how the sensory overload of inspiration from social media can actually have a negative impact on how we sew, and the enjoyment we get from it as a hobby.

Wonderful post. I buy more than I need… but I can’t buy it all. 40 prints in a line 2 lines a year x the number of designers that I love… (I live scrappy quilts, so I’m not compelled to buy large amounts…)

Thanks so much for these great articles. From what I saw, the fabric manufacturers over saturated the market with way too many collections that lacked originality. I would see “new” collections being released that looked just like previous collections from different designers. Some manufacturers showed zero respect for copyrights. Did any company review already existing collections to see if their designers were putting out collectons that were very close to already existing prints? It felt like the manufacturers just assumed that we, as consumers, would just buy anything they printed.

I really appreciated this article. I think its too easy to say, “Oh its fabric.com’s fault”, and I appreciated that this was more nuanced. So much of it–the artwork, the many collections, the small profit margins, the social media personalities becoming fabric designers–speaks to what my friends and I have talked about over the last few years.

Coats bought Free Spirit in January of 2007. In the ten years since more companies have begun offering premium quilting cottons, particularly with a modern aesthetic. Instagram launched and ecommerce took off. Retail overall has gone through (and is still experiencing) a radical shift.

Very interesting article. It would be interesting to read how American/Japanese and Far East (forgot the country) cotton fabrics end up overseas. I live in the Middle East and most ladies in the guilds and independent sewers (not in any guild) buy fabric locally and in abundance as the price is so low compared to their home country. I tend to stick to American brand fabrics. I was told they are the rejects from the industry. I wonder if this rings true for the other countries I mentioned above. Those rejects make their way to us. Now, when I go home to the States I buy little as I need to use my vast stash! I found the ladies here don’t care about designer or manufacturer and just choose what works for them and their project. It’s very interesting.

Abbey — thanks for the VERY informative article. The model is definitely flawed and there’s a glut of fabric on the market. It’s as simple as that. I can only hope that going forward, the fabric companies realize that unless they make decisions as an industry (not as individual fabric companies) – things like reducing the number of releases in a year, the glut will remain and more companies will need to be closed. I don’t think the purchase of Free spirit is the answer. Someone mentioned that if they had all those fabulous designers and still couldn’t make it, how can someone else? That’s the issue – there’s just too much fabric!!! We, the consumer, just can’t buy all that is being produced!

I was recently reading an article by a professional doll artist. She was speaking about the art doll craze and how at it’s peak, it suddenly started to decline and then art quilts became all the rage. I found that really curious and then after reading it makes me wonder if quilting is now going down the same path.

I’m seeing macrame coming back, of all things, and coming back really big with macrame wall-hangings in every home decor magazine. As an artist, I find this frustrating. I took a variety of classes, including textiles, in art school, but as you all know, it takes years to perfect a craft and jumping back and forth to various trends to keep making a living is not the way to become an expert at anything.

It’s rather frustrating unless you are just making things for yourself and loved ones.

Very good article. I would like to see an article on the problems that brick and mortar retail quilt fabric stores have with selling to newer quilters. i find that no matter how many fabric stores I go to, none are ever set up for me to buy fabric the way I want to buy it. I’d like to look at all the fabrics in a collection, but most fabric stores owners cherry pick from collections. None of the ones I’ve been to in our area (Northern VA) offer many precuts for sale. Just a couple baskets full. So when I go into a store I might already be looking for a specific manufacturer or a designer whose fabric I’ve seen online. But I can’t find it easily! They set up their fabrics by colors. But that is not how I shop, and I bet a a lot of quilters who learned through online courses or videos are the same. Plus, their prices are too high. And, they all sell out of a fabric line I want too soon. They’re so hyped on moving their lines through and out the market, they don’t help me. I may find a pattern and a collection I love from a site or Pinterest that came from last season or two seasons ago. So now I am supposed to rush around and buy stuff quickly based on that? Not gonna happen! The only sellers that are responsive to that part of the market are small Etsy stores who are slower to move their inventory, and thus they’re more likely to have that fabric in inventory after the season has ended. And their prices are usually good. They’re not harming the Missouri Star Quilt Companies of the world, because they’ve already sold out of that fabric long ago. But they do serve an important niche, which I really appreciate. My tastes don’t change as quickly as the marketers would like it to. Nor do I think most other quilters are that different. We like what we like, and it’s not going to stop just because another Spring rolls around.